Friday, January 8, 2010

I don't have much in the way of insights into today's employment report, but this chart is interesting. According to the establishment survey we are very close to a bottom. The household survey continues to decline, however, but the gap between the two surveys has narrowed considerably; if all goes well the household survey should show some bottoming action in coming months.

Regardless, it remains the case that the improvement in the labor market is gradual, and we are unlikely to see any dramatic decline in unemployment before the November elections. This all but ensures that the economy will be a major focus for the election, and Democrats are going to take a huge beating. Republicans will be successful to the extent they regroup and focus on the urgent need to rein in the explosive growth of spending, to avoid tax increases, and to lower and flatten the tax structure.

While the news continues to be rather grim, the prospects for the future are brighter.

I was surprised to see some of Rasmussen's daily polls on such subjects as whether we're headed to another Great Depression and generally whether the economy will pick up this year. Very negative sentiment out there. I suppose that should help Republicans but as I've argued before (and you've disagreed), Reagan's poll numbers were in the low 30s in December of 1983 before the economy turned around. I still fear that any improvement in employment by the end of the year will help the Democrats.

I'm sorry my question is off-topic.You use the series %debt to GDP for households, government, etc. I agree that government debt to GDP is important, but since it differs so greatly country by country, I wonder how you apply it to each case. The US has much lower % than Europe and Japan for instance.For household debt, I find ability to repay debt relatively more important. The Federal Reserve data shows repayment as % of disposible income not to have risen greatly in past few years. Of course, if interest rates rise, with more debt, the risks rise more quickly than if private debt is lower.I'd appreciate any comments you may have on these charts.Thankyou

There has been a huge increase in those receiving Emergency Unemployment compensation. This comes thanks to politicians who feel sorry for people suffering from job loss. Unfortunately there is a side effect: it greatly reduces the incentive for some 5 million people to look for jobs. So this tends to increase the number of people sitting around doing nothing.

The administration's efforts to manage this economy have not helped at all. This is going to be an ongoing problem all year even if the unemployment rate declines some and jobs start rising. It's not going to feel like a very strong recovery.

When policies are bad, the economy suffers. In this case we get a subpar recovery.

Richard: I've posted a number of times on the issue of debt. Your observations are largely correct. Household debt service burdens aren't frightening at all. The U.S. economy can support the current deficit for awhile. But what is really bad now is the level of government spending, and that is headed for new all time highs as a % of GDP. That is a deadweight drag on growth.

At a business meeting last night, I heard from a company president that they were rehiring workers they were forced to layoff several months ago.

She expressed frustration that her former workers -- all of them -- preferred to stay on unemployment rather than come back to work. One even stated that unemployment + food stamps + other assistance provided more in "take home" pay than working did.

The 12 month moving average of theratio of nonfarm payrolls to jobless claims continues to improve...we will get positve job growth next month in fact it is possible we got it this month afterrevisions.